Wednesday
Feb132008

Russell 1,000 Stocks With The Highest and Lowest Short Interest

Ever since shorting a stock became easier with the elimination of the uptick rule back in July 2007, market volatility has picked up.  Investors and traders can now send shares down much easier by continuing to add onto the short as the stock moves lower. 

Below we highlight stocks in the Russell 1,000 that currently have the highest and lowest short interest as a percentage of equity float.  During the rally earlier this month, stocks with the highest short interest were the ones that went up the most.  In yesterday's rally, however, the stocks with the lowest short interest went up the most.  In each of the tables, we also provide each stock's year to date performance.  Some investors may be interested in stocks with high short interest that are also up significantly this year because it means shorts will eventually have to cover.  Investors may also be interested in stocks with very low short interest that have poor fundamentals in order to get short before everyone else does. 

As shown, NTRI is the most heavily shorted stock in the Russell 1,000, with nearly 79% of its shares sold short.  The stock is down 11% this year, but if this company has better than expected news, the stock should have an out-sized rally as shorts scramble to cover.  IMB, ABK, VMW, JOE and SHLD follow NTRI on the most heavily shorted list.

Highestshort_3

Smallestshort_2

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Wednesday
Feb132008

Bespoke's Sector Snapshot with Trendlines

The gains over just the last few days have caused many investors to believe the market has begun to get its legs back under it after a number of knockdowns in recent months.  While it is comforting for bulls to see these gains, it is important to note that the market still remains in a downtrend and has key resistance levels to break before things look positive again.  As shown in our trading range chart below, the major resistance point for the S&P 500 is in the 1380 to 1390 range.  A break above these levels will be a major win for the bulls.

Spx500

Below we provide trading range charts for the ten S&P 500 sectors as well.  As shown, clear downtrends remain in Financials, Industrials, Consumer Discretionary and Telecom.  Many of these sectors have done well recently, but they still must break their downtrends before signaling the all clear.  While the Technology sector has had a very tough go at it in recent weeks, it did recently hold support from the February 2007 lows, which is a positive sign.  Consumer Staples, Health Care, Energy and Utilities are sectors that look the best on a technical basis.

Finlindu

Techenergy

Condcons

Hlthmatr

Utiltels

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Wednesday
Feb132008

S&P 500 Stocks Furthest Above and Below 50-Day Moving Averages

Below we highlight the S&P 500 stocks that are currently trading the furthest above and below their 50-day moving averages.  As shown, ETFC, PHM, YHOO, R, RRC and LEN are currently trading the furthest above their 50-days, while ABK, MBI, HAR, MTG and AAPL are trading the furthest below.  It's surprising to see that AAPL is one of 5 stocks out of 500 in the index that are the most oversold.  Currently, AAPL is 25% below its 50-day moving average and is down 36% on the year.  The list of most overbought stocks is made up largely of homebuilders and other consumer discretionary names, while the list of oversold stocks is made up of many financials and technology names.  Other notables on the list of oversold stocks are AIG, GOOG, MSFT, MOT and MS.

Above213

50day1

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Wednesday
Feb132008

Sector PE Ratios

Below we highlight one-year P/E ratio charts of the S&P 500 and its ten sectors.  This earnings season has caused some major shifts in valuations.  As shown, the P/E ratio of the Financials sector has spiked to 15.1 as earnings have slipped significantly.  Materials and Consumer Discretionary have also seen P/E spikes this quarter (Consumer Discretionary was dramatically affected by GM's negative earnings).  On the positive side, Technology, Energy, Consumer Staples, Health Care and Telecom have all seen declines in their P/Es this earnings season.  This indicates that earnings have remained strong as prices have fallen.

Spxpe

Finlindupe

Techenergype

Condconspe

Hlthmatrpe

Utiltelspe

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Tuesday
Feb122008

Sports Illustrated Market Indicator

Swimsuit_4 We've all heard of the Super Bowl Indicator, but have you ever heard of the Swimsuit Issue Indicator?  Over the last 30 years, an American has appeared on the cover of the annual Sports Illustrated Swimsuit Issue in 15 different years.  The average performance of the S&P 500 during those 15 years is a gain of 13.9% with 13 positive years (87%).  Of the fifteen years where no American appeared on the cover, the S&P 500 has averaged a gain of only 7.2% with 11 positive years (73%).  In the table below, we highlight the native country of the model appearing on each year's issue as well as the performance of the S&P 500 that year.

Swimsuit_models

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Tuesday
Feb122008

Not a Short-Covering Rally

The rally from the January lows to early February was due largely in part to short covering.  With that in mind, we checked to see if today's rally was being led by the most heavily shorted stocks.  Surprisingly, today's gains are being led by stocks that have the smallest amount of short interest as a percentage of float, while the most heavily shorted stocks are up the least.  Either the shorts are holding strong on their positions or they don't have nearly as much to cover as they did earlier in the month.

In the chart below, we broke up the Russell 1,000 into deciles (ten deciles of 100 stocks) based on short interest as a percentage of float.  We then calculated the average percent change on the day for stocks in each decile.  As shown, the decile of the most heavily shorted stocks is only up an average of 0.42%.

Shortinterest212

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Tuesday
Feb122008

Sector Relative Strength

Below we have updated our charts highlighting sector relative strength over the last year.  In each chart, rising lines indicate periods where the sector is outperforming the S&P 500, while red shaded charts indicate that the sector has underperformed over the last year.  Finally, in each chart we have also included red dots that indicate the six Fed rate cuts since August.

After a lengthy period of underperformance, the Consumer Discretionary sector recently broke its downtrend line and has continued to outperform.  At about the same time that the Consumer Discretionary sector bottomed, the Consumer Staples put in a short term peak.  That sector broke its uptrend line, and now after a short rally, the uptrend line, which previously acted as support, should now act as resistance. 

Not surprisingly, the Consumer Discretionary sector also bottomed right about the same time that Energy peaked.  As oil ran up to $100, the Energy sector became extended and has since pulled back to its uptrend line which is acting as support.

While Financials have been the excess baggage weighing down this market, the sector recently rallied to break its short term downtrend, but the longer term trend remains lower.  After breaking short-term resistance in January, the sector peaked on the day of the most recent Fed rate cut.  The only question now is will it hold support?

In January, when we last looked at sector relative strength, we noted the mixed signals the market was giving investors.  That trend remains intact today as sectors that are expected to hold up well in a recessionary environment (Health Care, Telecom Service, and Utilities) have been weak, while Cyclicals such as Materials and Industrials are outperforming.

Relative_strength_021208a_2

Relative_strength_021208b

Relative_strength_021208c

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Tuesday
Feb122008

Bespoke's Dow Analysis

Yesterday, we highlighted some aspects of the recent changes to the Dow in this post and a B.I.G. Tips report over at Bespoke Premium.  For those interested, the work got mentioned in today's Ahead of the Tape column in the Wall Street Journal as well as Canada's Globe and Mail.

To stay up to date on Bespoke's appearances in the media, be sure to visit our Bespoke in the News page.

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Tuesday
Feb122008

Country Performance From Top to Bottom to Now

Below we provide the performance of major indices for 21 countries from their 52-week highs to their most recent lows, along with their performance from their recent lows to their current levels.  This analysis highlights which countries took the biggest hits on the downside and which have seen the biggest bounces on the upside. 

As shown, the two countries that declined the most from their 52-week highs have barely bounced back at all.  Sweden went down 33.79% from peak to trough, and it is only up 6.82% from its low.  Hong Kong went down 32% and has bounced back 5.58%.  Russia, South Africa, Mexico and Brazil have registered the biggest gains off of their lows.  And the US has held up relatively well throughout the declines.  From peak to trough, the S&P 500 was down 19.42%, and from trough to now, the index is up 6.82%.  This is mostly due to the fact that US markets were closed on MLK day when foreign markets declined sharply on the Kerviel unwind.

We have also provided the ETFs that track these countries in the table below.

Countryperf

Countryperf1 

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Tuesday
Feb122008

Bear Blinks

Regular readers of Bespoke know that we like to track the price targets of major Wall Street strategists.  Each week, Bloomberg publishes a survey of these strategists that provides their year-end 2008 predictions for the S&P 500.  At the start of the year, the S&P 500 stood at 1,468.  Three strategists surveyed on January 2nd had a year-end price target of 1,700, which would have translated into a gain of 15.78%.  These were the most bullish analysts of the 15 surveyed, and the average of all strategists was looking for a gain of 11%. 

Unfortunately, the market hasn't played out as many would have liked thus far, and the three strategists with 1,700 price targets have now all lowered those estimates.  This week, Bear Stearns was the last of the three to blink, lowering their 1,700 target to a more modest 1,550. 

But even though many strategists have lowered their estimates, the current average estimate is still looking for a gain of 18.25% from now to year end.  This would indicate that they are even more bullish now than they were at the start of the year.

Spxpricetargets1

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Tuesday
Feb122008

Bespoke's Commodity Snapshot

Metals and agriculture continue to soar, and our trading range charts below indicate that they are currently trading at extreme overbought territory.  The green area in each chart below represents two standard deviations above and below the commodity's 50-day moving average.  As shown, Natural Gas, Silver, Platinum, Copper, Coffee and Wheat are all trading at or above the top of the green zone.  While prices can remain at overbought levels like this in the short term, the risk/reward trade-off for buying at these levels leans towards the risk side. 

Click here for a list of commodity ETFs.

Oilngas

Goldsilv

Platcopp

Ojcof

Cornwheat

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Tuesday
Feb122008

What a Guy

"Hahahahah.  When I fly commercial, that's when you'll know I'm broke!" - Warren Buffett, CNBC - 2/12/08

Monday
Feb112008

Recession Odds Stabilize at 67%

Every month or so, we like to update the Intrade prediction market odds of a recession in 2008.  As shown, after a spike in January, the contract has declined some and stabilized in the 65% to 70% range.  This means the actual money is putting the odds of a recession in '08 at about 67%. 

Recessionodds

Intrade also has contracts for whether or not US GDP growth will be positive in each quarter of 2008.  Based on these contracts, the odds for positive GDP growth are less than 50% for each quarter of '08, meaning investors are currently betting that we could have a recession for at least 4 quarters.

Recessionodds1 

And on a side note, it's funny to see that Intrade has even made contracts for US income tax rates over the next few years.  For those worried or obsessed about higher taxes, why not hedge your bets?

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Monday
Feb112008

This Email Is To Inform You That Your Email Is Not Working.

According to Reuters, Research In Motion (RIMM) sent an email to its clients this afternoon informing them that the Blackberry service was not working due to a "critical severity outage".  So let's get this straight.  Research in Motion (RIMM) is sending emails to clients to tell them that they won't be able to receive emails?

Monday
Feb112008

Market Returns in Euros

A recent commenter asked that we highlight the returns of various global equity markets in Euros as well as in local currencies to give better credence to the decoupling thesis.  As shown, due to the decline of the US dollar, the returns of the S&P 500 since the start of 2004 (as well as the Nikkei 225) look pretty paltry compared to other global indices when measured in Euros.

Euros21108

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